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Wayne County asks court to force Oakland, Macomb to resume talks on regional water authority

Wayne County wants U.S. Bankruptcy Judge Steven Rhodes to appoint a mediator to bring recalcitrant neighbors Oakland and Macomb counties back to the negotiating table on forming a regional water authority to manage the Detroit Water and Sewerage Department.

Wayne County, which has taken a middling position as Oakland and Macomb broke off talks with the city and Wayne County last month and brought objections to the city’s plan of adjustment in bankruptcy court, brought a motion of its own in Detroit’s bankruptcy case today.

“(N)egotiations are now at the ‘angry letter’ state, which has not produced any progress in negotiations,” states the county’s motion through attorney Max Newman at Butzel Long PC.

“Instead, the parties currently disagree even about the process and state of due diligence. While not minimizing the importance of the Disclosure Statement issues raised by Oakland County and Macomb County, Wayne County recognizes that it is critical that all issues related to DWSD must be, and will be, substantively resolved through the bankruptcy process.”

Actually, said Macomb County Executive Mark Hackel, the bankruptcy court is the last place to engineer a long-term, regional solution to the long-term financial challenges and aging infrastructure issues in the department.

“When (Detroit Emergency Manager) Kevyn Orr is gone, we’ll continue to work on a way of managing that as a regional asset, as regional partners,” Hackel said. “Kevyn Orr is not one of those regional partners — a mayor elected by the city of Detroit’s voters with power to act is a regional partner.

“(Orr) is not here to figure out how to deal with the integrity of that system or to work for the protection of the ratepayers. He’s here for one very simple reason: to figure out how to deal with the city’s creditors and emerge from bankruptcy. We’ll be happy to have the conversation now about forming a regional asset, if and when Kevyn Orr is no longer controlling the conversation.”

Regional leaders had been negotiating with Orr since last year over a proposal to form a regional water authority. The authority would boost city revenue by leasing the DWSD assets for at least $47 million a year for 40 years. After talks stalled, the city put out a request for information a few days earlier for private companies to possibly take over the department.

That request asks potential private investors to limit rate increases to no more than 4 percent a year for the next information also asks for bidders to include a $675 million payment to the General Retirement System or a proposal to carve out the DWSD’s share of plan assets and unfunded liabilities. The city’s plan of adjustment also calls for the post-bankruptcy DWSD to pre-fund the GRS with $675 million by the end of fiscal 2023, something Oakland County has said the city has yet to fully explain.

Wayne County’s motion requests that Rhodes appoint Chief U.S. District Judge Gerald Rosen in Detroit or another appointee as a mediator to resolve points of contention that made talks stall last month, like documents the counties claim they have been seeking from Orr’s office.

The county in a statement today said the mediator should also have power to bring the parties back to the table to continue negotiations for the creation of a regional authority to run DWSD.

“We continue to believe that a regional authority, on the right terms that work for the ratepayers, is still the way to go. With the court’s assistance, I believe people of good faith can still get a deal done that works,” Wayne County Executive Robert Ficano said in a statement.

“While positions have hardened on both sides of the table, I am hopeful that an appointed facilitator/mediator can breathe new life into the process.”

Oakland County officials have said talks broke down on forming the authority last month, when Detroit in an email asked that the three regional counties make a pledge toward the formation of the authority to take over the DWSD assets.

The suburban regional leaders would not agree to do that without completing a due diligence review of the system first, Oakland Deputy Executive Gerald Poisson has said.

Hackel said today that he is not opposed to forming an authority, but believes the emergency manager’s mission in bankruptcy gives him different interests than the region’s other leaders, and Orr may not share the others’ concerns about leaving regional water/sewer ratepayers with a hefty bill.

Detroit will ask Rhodes on Tuesday to let it send a disclosure statement to more than 170,000 voting creditors, including retirees and bondholders, to solicit their votes on its debt reduction plan. The plan calls for cutting public worker pensions and some bond payments.